US core capital goods rise in September; shipments accelerate
The latest data on US core capital goods indicates a healthy increase in new orders and accelerated shipments for September, highlighting sustained business investment in equipment. This positive momentum signals resilience in the manufacturing sector amidst potential economic headwinds, suggesting that firms are still willing to commit to expansion. The implications for the USD appear bullish, as robust business investment typically correlates with a stronger economy and potentially tighter monetary policy from the Federal Reserve.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). [PUBLISHER]'s view aligns more closely with the upper third — JPMorgan and ING share that framing.
How firms align
JPMorgan’s stance remains supportive of the headline's view, maintaining a target of 1.10, suggesting confidence in continued growth as reflected in this capital goods report. In contrast, BofA presents a more cautious outlook, with a target of 1.04, indicating a skepticism towards sustained economic momentum.
What the data shows
The data suggests an upward revision in growth forecasts, likely prompting firms to reassess their projections and positions relative to the USD. Recent research indicates that a robust manufacturing sector could lead to an eventual tightening cycle by the Fed, underscoring the importance of these capital goods figures as indicators of broader economic health.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01US core capital goods orders rose, boosting USD sentiment.
- 02Strong business investment signals continued economic resilience.
- 03Watch for USD strength around 1.075 amid upcoming Fed policy talks.
Market implications
Traders should monitor the 1.075 level for EUR/USD, especially with the forthcoming Fed meeting that could influence monetary policy expectations. Continued positive data may bolster the USD further.
Risks to this view
A sudden shift in economic data, particularly a downturn in manufacturing or consumer spending, could undermine this bullish outlook for the USD, forcing a reevaluation of positions.
Sentiment by currency
USD+EUR JPY GBP~Composite USD score: +0.65
Sources & References
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